Law Review: Robert Wu, America’s Unforgiving Forgiveness Program: Problems and Solutions for Public Service Loan Forgiveness, 72 Hastings L.J. 959 (2021).

Abstract:
In the first three years of Public Service Loan Forgiveness (PSLF), over 227,000 borrowers applied for relief. The U.S. Department of Education granted relief to less than 3800 borrowers, denying forgiveness to roughly 98% of the program’s applicants. This astronomically high rejection rate raises questions of responsibility for the program’s initial failure. Many have blamed the Trump Administration for using its political influence to manufacture an unforgiving result. However, a purely political explanation for the program’s failure provides an incomplete illustration of the reasons underlying PSLF’s demise. This Note examines the numerous pitfalls that resulted in PSLF’s unforgiving forgiveness rate. Specifically, it reviews the program’s development, from its creation in the halls of Congress, to various refinements developed under the Obama Administration, and the Trump Administration’s management of the program. Through this analysis, this Note raises two core issues underlying PSLF. First, the program contains a statutory and regulatory framework that appears oblivious to the realities of federal student loan repayment. Combining this disastrous framework with the second issue, the Trump Administration’s apathetic execution of the program, created a scenario that doomed borrowers seeking forgiveness. Ultimately, this Note recommends that Congress and the Department of Education develop comprehensive, multi-pronged reforms to address the program’s numerous problems. PSLF is more than just a borrower-friendly program; it provides vital recruitment incentives for public service employers who serve as the backbone of the nation’s communities. These reforms, if implemented, would create a robust and accommodating program that would successfully deliver loan forgiveness to our nation’s dedicated public servants.

Commentary:

I will start by expressing my satisfaction that the author refers to the U.S. Education Department throughout this note as "USED", both because it is personally confusing to have conversations about "Ed." and because USED more accurately reflects how many borrowers feel about their treatment by this agency.

Beyond that bit of snarkiness, this note does provide an excellent history of the PSLF program and provides greater insights into its failures and flaws, which were almost simultaneously publicized by the National Consumer Law Center its report, New Government Data Exposes Complete Failure of Education Department’s Income-Driven Repayment Program, which found that just 32 students have received the promised debt forgiveness under this program.

The common reasons for the denial of PSLF forgiveness applications:

Beyond these statistics from USED, the note does attempt to identify the reasons for the failure of the PSLF program. These include that:

• Only Direct Loans enrolled in Income-Driven Repayment plans are eligible;
• Only FedLoans administers the PSLF, which disincentives other servicers from suggesting or assisting borrowers from enrolling;
• Even with FedLoans, any eventual forgiveness of the loan under the PSLF costs the servicer future interest and fees;
• An "Arbitrary and Capricious" definition that USED limited the application of the PSLF not to employees whose "primary purpose" in a government and non-profit job was public service;
• Obstruction by USED of oversight by either the CFPB or Congress.

Also useful from this note is the cost of the failed PSLF program, with the Congressional Budget Office estimating that the government would save between $4.7 and $5.8 billion through 2023, and between $18.0 and $22.4 billion through 2028 by removing this program. Especially as only the costs of restoring bankruptcy discharge are ever included in the "scoring" for such legislation, the potential savings from shifting relief away from the failed PSLF program should also be weighed in the balance.

For a copy of this note, please click here:

America’s Unforgiving Forgiveness Program: Problems and Solutions for Public Service Loan Forgiveness